Report #22

Image from Sensiseed‘s article “Canada on its Way to Legalization of Cannabis“ 

Today, True Leaf published probably the most significant press-release since going public in February 2015. The company is now in the final stage before the granting of a production licence from Health Canada.

Most recently, Health Canada has requested detailed information about True Leaf’s planned operation in Lumby, BC, and the company responded today. The request came as part of the Detailed Review & Security Clearance Stage of Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).

Once True Leaf successfully completes this final stage, the company can expect to be granted a license to produce cannabis in Canada. Thereafter, Health Canada will schedule an inspection to verify that True Leaf is meeting the requirements of ACMPR, and if True Leaf successfully completes that step, Health Canada will issue a license to sell cannabis products in Canada.

With legalization of recreational cannabis in Canada anticipated to be in effect by mid-2018, the government is setting the stage to meet market demand with expansions of existing producers and the granting of more licences to produce and sell cannabis.

As of today, there are just 52 licenced producers in Canada. As noted in the last Rockstone report, a large supply deficit may evolve if not more producers are licenced. With 428 companies having applications in the Detailed Review Stage, True Leaf enjoys an early-mover advantage as it submitted its application in mid-2013 and has since then established a pet foods business based on hemp, generating revenues in Canada, USA, New Zealand, UK, Germany and Austria.

True Leaf today also disclosed that initial cannabis production at its planned operation in Lumby could begin in April 2018 with a target of 5,200 kg of cannabis annually (in case a licence is granted by Health Canada).

True Leaf‘s CEO, Darcy Bomford, has shepherded the company‘s application from the first day it was submitted to Health Canada on July 19, 2013; as of today exactly 4 years in the making. He commented today:

“It’s been a long process, but True Leaf’s team fully understands the importance of getting it right and ensuring that security and quality are paramount. We’re believers in the healing potential of cannabis and we’re committed to improving the quality of our customers’ lives. So we fully support Health Canada’s efforts to ensure a secure, quality supply.”

True Leaf’s latest submission responds to detailed questions from Health Canada about the size, capacity, security measures on site and future expansion plans. The company is working with industry experts (see here) to ensure it meets or exceeds the operating, facility, security and reporting procedures during this step in the ACMPR application process.

Currently, the plan for the first phase calls for a 48,000 square foot (4,459 square meters) facility that will meet ACMPR requirements. The facility’s initial production is anticipated to begin in April 2018 with a target of 5,200 kg of cannabis per annum. Assuming a retail price of $8.80 CAD per gram and a capacity of 5,200 kg per year, this location could supply over $45 million CAD in product annually. Future expansion is anticipated as the industry grows. A RAND study (2010) estimates the cost of production of legalized cannabis at around $2.10 CAD per gram.

Given the nature of this industry with margins being inherently high (>70%), a lucrative opportunity is created for companies capable to fulfill the regulatory requirements in order to receive a production license under the new ACMPR regime.

In May, Health Canada announced to have streamlined the notoriously lengthy and rigorous application process to become a licenced producer. The new measures will “enable increased production”, the department stated. The government agency has been issuing new licences at an an unprecedented rate in the last few months (including 3 new licences in 1 day in June).

According to Rachel Browne from VICE News on July 12, 2017:

“As Canada prepares to roll out what’s expected to be the world’s largest legal cannabis market next summer, industry insiders are looking to Nevada as a cautionary tale. Canada needs an estimated several hundred licensed cannabis producers to meet the expected demand from both Canadians and international weed tourists, according to industry players. But, to date, Canada has just 51. Health Canada, the department which oversees the marijuana cultivation system, told VICE News that they promise to “take into account the lessons learned from Nevada and other U.S. states that have a legal regime in place.“ In a sign of what might be in store for Canada, Nevada Gov. Brian Sandoval declared a state of emergency on Friday. Less than two weeks after recreational cannabis sales in the state began on July 1, dispensaries started to run out of product despite stockpiling for months.“

CIBC World Markets reports estimates of the potential value of the recreational cannabis market in Canada, ranging from $5 billion to $10 billion annually. This would translate into an annual consumption of 770,000 to 1.54 million kg of cannabis (at a price of $6.50 per gram). In order to produce this quantity, some 10 to 20 million square feet of production is needed (assuming a cannabis production of 77 grams per square foot). The average size of the currently approved licenced producer facilities appears to be about 60,000 square feet, which translates into a total of 167 to 333 facilities needed to meet demand. This creates a significant opportunity for companies that have the management expertise and resources to reach the final licence approval stages.

True Leaf´s competitive advantage is twofold:
(1) an established brand presence and
(2) an exceptional management team

While waiting for the cannabis production license to be approved by Health Canada, True Leaf pivoted into the pet product industry by developing and launching a line of hemp-focused supplements for pets under a new division called True Leaf Pet Inc., generating revenues in North American and Europe.

The company has been successful in creating a trusted and reputable brand in the hemp and pet space, thus paving the way for future products sold under the True Leaf® brand as a licenced cannabis producer and seller under the ACMPR.

True Leaf‘s hemp-based product line for pets is already a success in North America and Europe.

Company Details

True Leaf Medicine International Ltd.
100 Kalamalka Lake Road, Unit 32
Vernon, BC V1T 9G1, Canada
Phone: +1 778-389-9933

Shares Issued & Outstanding: 64,512,922


Canadian Symbol (CSE): MJ
Current Price: $0.485 CAD (07/18/2017)
Market Capitalization: $31 Million CAD


US Symbol (OTC): TRLFF
Current Price: $0.379 USD (07/18/2017)
Market Capitalization: $25 Million USD


German Symbol / WKN (Frankfurt): TLA / A14NM1
Current Price: €0.323 EUR (07/19/2017)
Market Capitalization: €21 Million EUR

Previous Coverage

Report #21 “True Leaf joins elite group of companies at final stage before pre-licence inspection to produce cannabis“ 

Report #20 “True Hemp available soon in Germany and Austria“ 

Report #19 “True Leaf acquires OregaPet, a revenue generating company with award-winning medicinal products“

Report #18 “True Leaf starts production, sales and marketing in Europe, backed by first major purchase order“ 

Report #17 “True Leaf just started to take root (to grow big thereafter)“ 

Report #16 “New sales channel for the market buzz: True Leaf products now also sell online“ 

Report #15 “Hemp for Dogs: True Leaf from Canada brings a special treat to the worlds leading trade-show Interzoo“ 

Report #14 “True Leaf pushes the gas pedal and brings True Hemp to Europe“

Report #13 “True Leaf conquers the US Pet Food Market” 

Report #12 “True Leaf To Sell Hemp-Based Products in 3500 Stores in the US” 

Report #11 “True Leaf‘s Product Line Now Available in 47 Canadian Retail Stores” 

Report #10 “True Leaf‘s Selling Fast”

Report #9 “True Leaf Expands to Europe”

Report #8 “True Leaf Unveils New Product Line” 

Report #7 “Another Key Piece for the True Leaf Puzzle”

Report #6 “True Leaf Pet’s Hemp Chew Product Line to be Distributed Across Canada” 

Report #5 “Interview with True Leaf‘s CEO Darcy Bomford“ 

Report #4 “One Step Closer Becoming A Licenced Medical Marijuana Producer“ 

Report #3 “True Leaf on its way to production“ 

Report #2 “True Leaf To Enter The Pet Food Market With Hemp Products In Fall of 2015“ 

Report #1 “True Leaf Medicine International Ltd. Goes Public“ 

Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist.

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Name: True Leaf Medicine International Ltd.
Canada Symbol: MJ
Germany Symbol / WKN: TLA / A14NM1
Shares Issued & Outstanding: 64,512,922
Phone: +1 778 389 9933

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